Buying large equipment is one of the biggest investments a small business can make. Whether you run a construction firm, manufacturing shop, farm, or medical practice, heavy machinery and specialized tools are essential for productivity and growth — but they come with a hefty price tag.
Fortunately, several financing options can help you purchase or upgrade equipment without draining your working capital. This guide breaks down how to finance large equipment purchases for small businesses, what loan types to consider, and how to choose the best strategy for your goals.
Large equipment often costs tens or hundreds of thousands of dollars. Paying upfront can strain cash flow, limit your ability to cover other expenses, or delay growth opportunities. Financing helps you:
Preserve working capital for payroll, operations, or marketing
Acquire modern technology to stay competitive
Spread costs over time with predictable payments
Maintain cash reserves for emergencies or seasonal dips
Build business credit with consistent repayment history
The key is selecting the right financing structure for your industry, budget, and long-term goals.
Here are the most common and effective methods for small businesses in 2025:
1. Equipment Loans
An equipment loan is one of the most straightforward ways to finance big purchases. The equipment itself serves as collateral, making it easier to qualify than unsecured loans.
Loan amount: Typically covers 80–100% of equipment cost
Terms: 3–10 years depending on asset lifespan
Rates: Usually fixed, between 6%–12% depending on credit
Benefits: You own the equipment outright once paid off
Downside: Maintenance, depreciation, and resale are your responsibility
Best for: Businesses that want ownership and plan to use the equipment long-term.
2. Equipment Leasing
If you prefer flexibility or expect to upgrade equipment regularly, leasing may make more sense.
Operating leases: Short-term rental; return equipment at end of term
Capital leases: Long-term lease with option to buy at a discounted price
Pros: Lower upfront cost, tax-deductible payments, access to newer technology
Cons: No ownership (unless you buy at the end); higher long-term cost
Best for: Businesses needing short-term flexibility or frequent upgrades (e.g., IT, medical, or logistics sectors).
3. SBA 7(a) Loans
The SBA 7(a) program is a popular option for financing large equipment purchases. Because these loans are partially guaranteed by the U.S. Small Business Administration, they come with favorable rates and long terms.
Loan amount: Up to $5 million
Terms: Up to 10 years for equipment
Rates: Variable or fixed, typically prime + 2–3%
Pros: Lower interest rates, long repayment terms
Cons: Extensive documentation and approval time
Best for: Established small businesses seeking affordable, long-term financing.
4. SBA 504 Loans
The SBA 504 loan program is designed specifically for fixed assets like real estate and equipment.
Loan structure: 50% from a bank, 40% from a Certified Development Company (CDC), 10% down from borrower
Loan amount: Up to $5.5 million
Terms: Up to 10 years for equipment, up to 25 years for real estate
Pros: Fixed interest rates and long terms
Cons: Strict eligibility and use requirements
Best for: Businesses investing in high-value, long-term equipment (e.g., manufacturing or construction).
5. Business Term Loans
A traditional term loan from a bank or online lender gives you a lump sum of capital for large purchases.
Loan amount: $25,000–$500,000+
Terms: 2–7 years
Pros: Predictable payments and flexible use
Cons: May require strong credit and collateral
Best for: Businesses that want to fund both equipment and related expenses (like installation or training).
6. Vendor Financing
Some manufacturers and distributors offer in-house financing or partnerships with lenders.
Pros: Streamlined approval, competitive rates, bundled service contracts
Cons: May limit flexibility and tie you to one supplier
Best for: Businesses purchasing directly from trusted vendors with favorable financing terms.
7. Business Line of Credit
A revolving line of credit can be a flexible way to fund equipment purchases — especially if you plan to buy in stages.
Pros: Borrow as needed; pay interest only on what you use
Cons: May not cover full cost of large machinery; variable rates
Best for: Businesses with ongoing or incremental equipment needs.
Estimate equipment costs and ROI
Compare loan or lease options
Gather financial statements and credit reports
Choose a lender or financing partner
Apply and review loan terms before signing
Lenders evaluate several factors when reviewing your application:
Credit score: 650+ preferred for most lenders
Time in business: At least 1–2 years (startups may qualify with higher down payments)
Revenue: Stable or growing cash flow
Collateral: The equipment itself or other assets
Business plan: Explaining how the equipment will increase efficiency or revenue
Under Section 179 of the IRS Tax Code, small businesses can deduct the full purchase price (up to $1.22 million in 2025, pending inflation adjustments) for qualifying equipment bought or financed during the year.
That means financing equipment doesn’t just improve productivity — it can also reduce your tax burden. Always consult your accountant to maximize these deductions.
❌ Overborrowing: Don’t take on more debt than your cash flow can handle.
❌ Ignoring total cost of ownership: Include maintenance, insurance, and depreciation.
❌ Skipping rate comparisons: Different lenders offer vastly different APRs.
❌ Failing to review lease terms: Check buyout options, renewal clauses, and end-of-term fees.
Large equipment purchases can transform your business — boosting output, efficiency, and profitability. With the right financing, you can make those investments strategically without putting pressure on your cash flow.
Whether through an SBA loan, equipment lease, or vendor financing, focus on long-term ROI, not just short-term affordability. The right financing plan turns heavy machinery into a powerful growth engine for your small business.
to Finance Large Equipment Purchases for Small Businesses